PG&E Faces a Reckoning - Consequences of California Fires

UTILITIES PG&E Faces a Reckoning

Via @ElmaAksalic

One day after losing its CEO Geisha Williams, PG&E said it plans to file for Chapter 11 bankruptcy protection by the end of the month. How'd we get here? California's largest utility is staring down about $30 billion in potential liabilities tied to its role in Golden State wildfires in 2017 and 2018. Officials determined PG&E power lines sparked at least 18 major wildfires in 2017, plus it's under investigation for its role in November's Camp Fire (the deadliest in state history). Yesterday, PG&E disclosed it had only about $1.5 billion in cash and cash equivalents on hand, adding that bankruptcy was the best choice for shareholders, creditors, and customers. It's been a quick downturn A week ago, PG&E held investment-grade ratings from all three major credit raters. Its bonds traded above face value two months ago...but now go for 85 cents on the dollar.  Shareholders are also bracing for impact. PG&E stock had dropped 63% from the start of the Camp Fire to Monday morning, and shares lost more than half their value yesterday. California lawmakers had weighed steps to rescue PG&E, but the company decided state assistance would simply take too long (possibly years) to avoid a bankruptcy filing. Plus, the state doesn't seem interested in a bailout anymore. The big picture As Bloomberg pointed out, PG&E's bankruptcy is another that must've downed some cold brew before getting started. Compared to Sears, where "bankruptcy" is a word that's been tossed around for years, other companies aren't waiting to take the leap. One example? Toys 'R' Us filed for bankruptcy in September 2017...within weeks of a report saying that option was on the table. The word you need to know moving forward: "Uncertainty," says the WSJ. Uncertainty for bondholders, shareholders, employees, and customers, and uncertainty for the state's ambitious climate change initiatives, including solar and battery projects.